Construction interest rate comparison for your property – repayment rate, interest rate comparison & various influencing factors

Building interest comparison for your real estate – building interest or also mortgage interest, of different credit institutes need you, in order to be able to lock a construction financing. The comparison is important to find the best and cheapest construction financing for their dream property. Especially the Internet offers an incredible number of financing advisors, where you can compare and calculate the current interest rate. Sensible – because you can save a lot of money. With a calculator for construction interest, you can easily enter the most important data such as income, loan, location of the construction project, term, etc., to have in the end tangible figures for the planning of your property.

Building interest rate comparison – when is it worthwhile for your property?

Various factors are used to calculate construction interest rates . First and foremost, however, the construction interest rates are derived from the situation on the financial markets. The most important of these are the key interest rates, which are set by the European Central Bank in Germany and which indicate the interest rate at which money can be borrowed on the market. For the future property owner, the key interest rate has an effect on the annual interest rate of the construction financing and especially in times of crisis, this is favourable for the builder.

By applying for low interest rates on loans, economic stimulus is hoped for various industries. This also applies to the real estate market, because in order to strengthen the market, low interest rates are offered to the builder. Although the prime rate here already gives a certain direction, all banks still have different interest rates that are offered to customers. Because of this, it is well worthwhile for builders to strive for a construction interest rate comparison to really achieve the best deal for their own property.

Factors influencing the individual determination of the construction interest rate

However, the market-dependent borrowing rate is not automatically the interest rate that the borrower must pay per year on the remaining debt. The final interest rate is only determined after taking into account many other factors. These include, among other things, the processing fees of the banks, because they charge a fee for the provision of construction money.

The so-called effective interest rate is therefore already somewhat higher than the actual debit interest rate. From bank to bank, different effective interest rates come about for the builder, which vary depending on the construction loan. Another factor is the personal circumstances of the builder. This includes things like the solvency due to the credit rating, the income and the available equity.

These factors also have an influence on how high or low the final construction interest rate is. Concrete information about the interest rate can therefore only be given once this personal information has been obtained. Here again shows how important the comparison of different construction interest rates can be to find the right loan individually tailored to you.

Information on the construction interest rate comparison – what is required of you?

During a bank appointment to discuss the construction loan, some important information will be requested from you in order to tailor the construction interest rate to your individual construction project. These include, among others, the following influencing factors:

Location of the property – the postcode as an important influencing factor

The postcode is considered to be one of the most important criteria by the financing calculators. The reason for this is quite simple, because banks and credit institutions can already find out a lot about the location and the location quality of the property on the basis of the postcode. It is now easier for the banks to classify the property. Some well-known postcodes, such as 60323 which belongs to the prestigious location of Frankfurt, the Westend recognize banks immediately and know how expensive real estate can be there. Some institutions for loans advertise that properties or construction projects in certain areas or places get an interest rate advantage. The specification of the postal code is therefore inevitable.

Equity capital and the required loan amount

Of course, you should also know how high the loan amount is that you need for the purchase or construction of the property. The determination of the available equity is enormously important here. So that you can be sure what you can really afford, you should calculate your exact budget in advance and draw up a budget plan. The equity determines the loan amount available and therefore the property you can afford. At the appointment with the bank, you should already know the exact purchase price of the house, so that the calculation for your loan can be calculated accurately.

Purchase price of the property

The loan-to-value ratio must be present when calculating the mortgage interest rate so that the bank can assess the risk of lending. The loan-to-value ratio is the ratio of the required loan amount to the mortgage lending value. The mortgage lending value, in turn, is the market value of the property minus a safety discount of 10 to 30 percent. This is calculated to cover possible renovations or additional costs and to have a small cushion. The conditions advertised by the banks usually refer to a lending limit of a maximum of 60 percent of the mortgage lending value.

Desired fixed interest rate from the builder

The builder should always have an idea of the fixed interest rate and also specify it. However, the longer the fixed interest rate is desired, the higher the debit interest rate will be. A known interest rate requirement is therefore important both for you and for your advisor.

Desired repayment rate from the building owner

The builder should also have an idea of the desired repayment rate, as this can also have an impact on the borrowing rate. Some banks charge a surcharge on the borrowing rate if the repayment falls below a certain limit. This is normally the limit of two percent, which should not be undercut. The reason for this is that low interest rates lead to extremely long terms, which can be significantly accelerated again by the repayment rate or unscheduled repayments.

However, you can also get an approximate construction interest rate online. There are many platforms that carry out a comparison of construction interest rates with various banks and credit institutions and provide you with an approximate overview of the available offers. Even with these online comparisons, however, you must provide all this information so that the loan offer can be individually tailored to you.

Optimal interest rate design is the be-all and end-all for a good loan

In order to keep the future interest rate risk as low as possible for the builder-owner, a number of things should already be taken into account when choosing the fixed interest rate period. Only certain options are usually offered by the banks and institutions. Mostly, the following options are offered:

  • Building loan with variable interest rate
  • Fixed interest rate of 10 years
  • Fixed interest rate of 5 years

More and more credit institutions and banks have recently started to offer customers fixed-interest periods of 15, 20 or even 25 years. However, loans with variable interest rates are critical for customers, because they involve a high risk. Any increase in interest rates in the market will be used by the lender to increase their interest rate and so the cost to you will increase. Such loans usually have the most favorable interest rates, but are too risky and should rather not be entered into by builders.

This is an important basis for keeping the subsequent interest rate risk as low as possible. It is always optimal for the customer if a full repayment loan is concluded. A full repayment loan is a real estate loan where the interest rate remains constant over the entire repayment period. The interest rate risk is therefore eliminated and the customer is not at risk of increased interest rates during the term. Consequently, there is no need to take out follow-up financing. However, these full repayment loans are usually significantly more expensive than ordinary annuity loans, which have a fixed interest rate of 5 or 10 years, for example.

Repayment rate – decisive for the construction interest rate

Besides the right interest rate, the initial repayment is the decisive factor for a successful loan. Like the interest rate, the repayment rate depends on many factors, including the current situation on the market and interest rates. In low-interest phases, higher repayments should therefore be agreed, which should not be less than three percent. In such a case, an initial repayment of five percent is particularly favourable for customers. However, this can fluctuate depending on the situation.

However, always keep the interest rate in mind when calculating the repayment rate, as the two have a strong effect on each other. You should still be able to afford the repayment rate without any problems. The higher the repayment rate, the faster the building loan is paid off and only a small residual debt is still available for the follow-up financing. The higher monthly interest rates will then no longer have such an enormous effect on the monthly instalment.

To show how differently the financing can proceed with different repayments, the example calculation can clarify, in which in each case a different repayment rate is selected and the other details remain identical.

Example 1:
The loan amount is 150,000 euros with an interest rate of 1.80 %. The repayment rate in this example is 5%. The fixed interest rate is 10 years and the monthly loan instalment is 850 euros. Based on the given data, the borrower still has a residual debt of 67,893.37 euros after 10 years. The follow-up financing can therefore be started with a new interest rate of 5% and a new monthly instalment of 1,010 Euros. The total term for the loan is therefore 17 years at the end.

Example 2:
The loan amount here is also 150,000 euros with an interest rate of 1.80 %. However, the repayment rate in this example is only 1%. The fixed interest rate is also 10 years and the monthly loan instalment is therefore 350 euros. Based on the given data, the borrower still has a residual debt of 133,578.67 euros after 10 years, i.e. considerably more than in example 1. The follow-up financing can therefore be started with a new interest rate of 4.80 % and a new monthly instalment of 680 euros. The total term for the loan at the end is 57 years for the borrower.

Building interest calculator – simply obtain offers online

Before you go to the bank, however, it makes sense to perform a preliminary calculation online to get a feel for the market and the current situation. With these calculators, you can also enter your individual details and obtain an offer tailored to you. So there are many advantages for future property owners, because an overview is created. You can find the best online construction interest calculators here: